Reinsurance

3 Months Ended

Mar. 31, 2022

During the periods presented, the Company used reinsurance contracts to protect itself from losses due to concentration of risk and to manage its operating leverage ratios. As of December 31, 2021, the Company had commuted all of its reinsurance agreements. For further discussion of the reinsurance agreements in place as of March 31, 2021, see Note 10, Reinsurance of Notes to Consolidated Financial Statements included in the Company’s 2021 Form 10-K Annual Report.

Effective January 1, 2022, the Company entered into an agreement with Swiss Reinsurance America Corporation ("Swiss Re") and Mapfre Re, Compania de Reaseguros, S.A ("Mapfre"). On a prospective basis, under the terms of the transaction, 30% of the Company's gross written premiums, losses, and certain LAE expenses are ceded to the reinsurers through June 30, 2023.

The insurance company was not relieved of its primary obligations to policyholders as a result of any reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The credit risk associated with the Company’s reinsurance contracts was mitigated by carefully selecting its reinsurers and monitoring their financial strength ratings. The 2022 reinsurance counterparties and their A.M. Best financial strength ratings are as follows: Swiss Re (A+) and, Mapfre (A).

Reinsurance recoverables are presented on the consolidated balance sheets net of the allowance for estimated uncollectible reinsurance (“ACL”), if any. As of March 31, 2022, no ACL is required on these balances. The Company estimates the ACL based on the amount of reinsurance recoverables exposed to loss multiplied by estimated factors for the probability of default and the amount of loss given default. The probability of default is assigned based on each reinsurer's credit rating. Of the total reinsurance recoverables at March 31, 2022, all were rated by A.M. Best Company. Credit ratings are reviewed on a quarterly basis and any significant changes are reflected in an updated estimate. The loss given default factors are based on a study of historical recovery rates for general creditors as estimated through multiple economic cycles.

The effect of the Company’s reinsurance agreements on premiums, loss and LAE related to the insurance company for the three months ended March 31, 2022 (unaudited) and the year ended December 31, 2021 is as follows (in thousands):


	March 31, 2022 (unaudited)
	Premium Written		Premium Earned		Unearned Premium		Losses and LAE Incurred		Loss and LAE Reserves
Direct	$	29,328	$	28,131	$	16,924	$	29,072	$	76,916
Ceded	(8,798)		(8,440)		(359)		(7,102)		(4,408)
Net	$	20,530	$	19,691	$	16,565	$	21,970	$	72,508


	December 31, 2021
	Premium Written		Premium Earned		Unearned Premium		Losses and LAE Incurred		Loss and LAE Reserves
Direct	$	110,719	$	111,063	$	15,726	$	102,991	$	73,438
Ceded	(19,411)		(33,080)		—		(14,701)		—
Net	$	91,308	$	77,983	$	15,726	$	88,290	$	73,438